no slide title · 2014-09-23 · suncor is another major oil-sands company as reported in the globe...
TRANSCRIPT
time
0 1 2 3 4 ….
Cashflowat each period
negative
positiveWe know how to calculate profitability;; now, let’s learn how to estimate the data, i.e., the costs.
1. Time value of money2. Quantitative measures
of profitability3. Systematic comparison
of alternatives4. Estimation of costs
Capital Cost Estimating
90
Cost estimation
What is Syncrude?A. A company in Alberta, Canada.
B. The result of heavy oil being processed to form a synthetic crude oil of further processing.
C. A major source of crude oil for western Canada
D. The major employer in Fort McMurray, Alberta
Cost estimating is important to study.
Cost estimation
91
Capital Cost Estimating
Syncrude has reported several changes to the cost estimate for its major expansion project that added 100,000 B/d of synthetic crude capacity.
Initial estimate: 3.6 Billion $
Don’t let this happen to you!
Second correction: 5.1 Billion $
First correction: 4.6 Billion $
“As built” cost: 8.4 Billion $
As reported in the Globe and Mail, 14 September 2002 and 01 September 200792
Capital Cost Estimating
Cost estimation
Suncor is another major oil-sands company
As reported in the Globe and Mail, 27 March 2013 93
Capital Cost Estimating
Cost estimation
“Suncor Energy Inc. cancelled its $11.6-billion Voyageur upgrader project because of soaring capital costs – and the belief that better profits are to be found in shipping out unprocessed bitumen.
• Suncor will take a $140-million writedown that will erode its first-quarter profit • In February, Suncor wrote off $1.5-billion of its investment in the upgrader.
Since 2010, market conditions have changed significantly, challenging the economics of the Voyageur upgrader project.
Suncor has already invested $3.5-billion in Voyageur, but decided to pull the plug after a detailed review… This decision is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher-return growth projects.
Consider the ripple effect across the industry this caused”
Class discussion
Equipment suppliers and technology licensors will give us estimates. We could call them and receive an estimate. This approach would involve little effort,
So, why is cost estimation a skill needed by all engineers?
We can always get someone else to tell us the costs.
Is this a good idea?
94
Capital Cost Estimating
Cost estimation
Order of magnitude for toluene + hydrogen benzene
Block flow process diagram 96
Capital Cost Estimating
Cost estimation
Order of magnitude: heading to more detailed
Skeleton Process Flow Diagram 97
Capital Cost Estimating
Cost estimation
More detailed estimate (study phase)
Detailed Process Flow Diagram 98
Capital Cost Estimating
Cost estimation
Definitive estimates
Detailed PIDs 99
Cost estimationCapital Cost Estimating
We must balance the needed accuracy with the cost to perform.(See Peters and Timmerhaus, Pg 160-162)
Takes time and effort: Total cost to prepare an estimate could be several $100k, but the same effort would be required later in the design phase, part of cost is really just pre-investment.
Name Accuracy Application Process detailOrder of magnitude -30 to +50% Screen investments Block flow diagramStudy -15 to +30% Finalize major choices PFD + rough design
of major equipmentDefinitive -5 to +15% Control costs P&I Drawing, detailed
M&E balances,equipmentspecifications
100
Capital Cost Estimating
Cost estimation
No shortcut: A flow sheet simulation (e.g., HYSIS/PRO II/ASPEN) is required when developing a definitive cost estimation. The information is required for accurate estimates of both capital and manufacturing costs.
Name Accuracy Application Process detailOrder of magnitude -30 to +50% Screen investments Block flow diagramStudy -15 to +30% Finalize major choices PFD + rough design
of major equipmentDefinitive -5 to +15% Control costs P&I Drawing, detailed
M&E balances,equipmentspecifications
101
Capital Cost Estimating
Cost estimation
We must balance the needed accuracy with the cost to perform.(See Peters and Timmerhaus, Pg 160-162)
COST ESTIMATION
102
Capital Cost Estimating
This useful table is available in Peters and Timmerhaus [Fig 6.4] and in Perry’s Handbook [link on course website]
It gives a summary of the type of information needed for each level of estimate.
103
Capital Cost Estimating
Cost estimation
Capital costs
• Fixed equipment
• Working capital
Manufacturing costs
• Direct (materials and labour that scale in proportion to throughput)
• Fixed costs (utilities, labour, etc, that are required no matter what the production rate is)
Evaluating capital equipment cost estimates:
Use historical data to develop correlations, and apply corrections for unique factors in specific situations.
104
Capital Cost Estimating
Cost estimation
Capital cost estimationMethods covered in this course
• A couple of very rough methods (initial screening)- Turnover ratio- Lang’s Factor
• Bare Module (BM) method- Concept and items included- Factor tables with corrections- Inflation- Examples
BM is most commonly used
method inprocess
industries.
105
Capital Cost Estimating
Cost estimation
Turnover ratio: values of 0.2 to 4.0; usually 0.5 in the process industries
(Fixed capital cost)(TR) = gross annual saleserrors are between –50% to +100%
We can use this to estimate the fixed capital costs for a plant making a known quantity for sales. The number of times we turn around our capital cost into sales.
106
Capital Cost Estimating
Cost estimation
Very rough capital cost estimation (use with caution!)
Reference: Perry’s Ch 9.3;; Peters Ch 6
Lang’s factor is used to estimate fixed capital cost given the delivered cost of the equipment:
( delivered cost of major equipment )(LF) = Fixed capital cost
Type of plant Fixed capital solids processing (cement) 4.0 solid/fluids processing (alumina) 4.3 fluids processing 5.0
1. Uses only delivered cost (no L+M for installation)
2. Estimated fixed capital cost includes land plus contractors fees
107
Capital Cost Estimating
Cost estimation
Very rough capital cost estimation (use with caution!)
Reference: Perry’s Ch 9.3;; Peters Ch 6
Delivered cost
108
Capital Cost Estimating
Cost estimation
109
Capital Cost Estimating
Cost estimationFixed capital cost
flickr-6343899995_e9ecd80533
Bare module method most commonly used for capital cost estimation. Here’s the general approach:
1. Historical cost for equipment (common material, low pressure, ambient temperature)
+ correct for capacity, material, P, T, and inflation
2. FOB (free on board)
+ labour and materials for installation + shipping
3. Bare module cost
+ contractors fees, contingencies, etc.
4. Total module cost110
Capital Cost Estimating
Cost estimation
FOB cost
Bare module cost is for all associated equipment and installation labour in a radius ~3m.
111
Capital Cost Estimating
Cost estimation
Bare module cost includes the following:
• labour and materials
• Uncrating
• Inspection
• Structure (foundation, etc.)
• Piping
• Instrumentation
• Painting and insulation
• Utility hookup (electrical, water, steam, sewer, etc.)
• Engineering supervision112
Capital Cost Estimating
Cost estimation
FOB free on board, cost of equipment ready forshipment from supplier
Installed = FOB + shipping + uncrate, inspect,and hook up
L+M = (installed-shipping) + piping +instruments + electrical + insulation +foundation + structure + offsites
L+M = FOB * (L+M Factor)
Physical plant cost = L+M + shipping Note that shipping cannot be correlatedBM = above + home engineering + field
expenseBM = Bare moduleHome off = 9% of L+MField = 10 to 15% L+MBM = FOB*(BM Factor)Rough esimateBM factor = (L+M)*1.4
TM = Total fixed capital investment = BM + contractors fees + contingencies
TM = total moduleContr = 3 to 5% of BMConting = 10 to 15% of BM
Totalinvestment = above + royalty + land + spareparts + legal + working capital + interest duringconstruction
Working capital = 10+% of fixed capital invest.This could vary greatly.
Note: This is for isolated module, notgrassroots plant.
Turnkey cost = total invest + Startup expenses
Notes: 1. Total module (TM) does not account for site development, off-sites, utilities, etc.These costs would vary depending upon the equipment considered. Turton (pg. 68)suggests 35% of BM costs for this factor.
Summary of the Bare Module method
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Capital Cost Estimating
Cost estimation
FOB free on board, cost of equipment ready forshipment from supplier
Installed = FOB + shipping + uncrate, inspect,and hook up
L+M = (installed-shipping) + piping +instruments + electrical + insulation +foundation + structure + offsites
L+M = FOB * (L+M Factor)
Physical plant cost = L+M + shipping Note that shipping cannot be correlatedBM = above + home engineering + field
expenseBM = Bare moduleHome off = 9% of L+MField = 10 to 15% L+MBM = FOB*(BM Factor)Rough esimateBM factor = (L+M)*1.4
TM = Total fixed capital investment = BM + contractors fees + contingencies
TM = total moduleContr = 3 to 5% of BMConting = 10 to 15% of BM
Totalinvestment = above + royalty + land + spareparts + legal + working capital + interest duringconstruction
Working capital = 10+% of fixed capital invest.This could vary greatly.
Note: This is for isolated module, notgrassroots plant.
Turnkey cost = total invest + Startup expenses
Notes: 1. Total module (TM) does not account for site development, off-sites, utilities, etc.These costs would vary depending upon the equipment considered. Turton (pg. 68)suggests 35% of BM costs for this factor.
Method and Data for Bare Module method
We have data from the past on a limited number of designs
The labour and materials depends on the equipment design
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Capital Cost Estimating
Cost estimation
Method and data for Bare Module method
We will now cover the various “factors” that are used to enable us to estimate the cost of equipment with various capacities, pressures, etc. from a limited set of data.
]correction condition [operatingfactor] ion[installat factor] [inflationfactor][capacity [Database]cost BM
Limited number of specific equipment designs and times
Correction for the “capacity”
Correction for the inflation from the database year
Additional cost for equipment and labour to connect to the process
Correction for process conditions that affect the capital cost, e.g., pressure, and for materials of construction
115
Capital Cost Estimating
Cost estimation
Capacity factor - Converting the historical capital cost data to FOB using the power law.
1. What is a typical value for “n”?2. Why does a power-law work?
The “factor” is selected to be the feature of the design that correlates best with the capital cost item.
Usually set B = known and A = new design
116
Capital Cost Estimating
Cost estimation
n
B
A
B
A
FactorFactor
CostCost
What is the correct factor for a shell and tube heat exchanger?• Heat duty• area• number of tubes• flow rate
117
Capital Cost Estimating
Cost estimation
Capacity factor - Converting the historical capital cost data to FOB using the power law.
n
B
A
B
A
FactorFactor
CostCost
What is the exponent for a shell and tube heat exchanger?
Area has the dominant effect on manufacturing cost.
Pumps: m3/s or power
Agitators: power
Distillation: height*diameter
118
Capital Cost Estimating
Cost estimation
What is the correct factor for a shell and tube heat exchanger?• Heat duty• area• number of tubes• flow rate
What is the exponent for a shell and tube heat exchanger?
Capacity factor - Converting the historical capital cost data to FOB using the power law.
n
B
A
B
A
FactorFactor
CostCost
Capacity factor: the power n < 1.0 (usually) !
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Capital Cost Estimating
Don Woodsmaterials
The correlation should onlybe used in this range
Slope = n
Costs in U$ in 1979
The suitable capacityfactor on the horizontal axis
Rough guideline, n = 0.6
Capacity factor: the power n < 1.0 (usually) !
What could limit the use of the power law?
120
Capital Cost Estimating
Cost estimation
n
B
A
B
A
FactorFactor
CostCost
Materials of constructionTemperature and pressure ranges
Key point: always look up the value of n
Example
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Capital Cost Estimating
Cost estimation
A certain electric motor with capacity of 100 hp cost $4 500. What is the estimated cost of a motor with capacity of 175 hp?
Electric motors of this type have a capacity factor of n=0.81.
$7,080100175$4,500Cost
100180
$4,500Cost
FactorFactor
CostCost
0.81
A
0.81A
n
B
A
B
A
Advantage of the correlations:You can estimate prices of largeror smaller units at any point in time from another unit’s cost. Does not only apply in 1970, but at any time!
Inflation factor - Converting the historical capital cost data to the time when the equipment is purchased.
Why don’t we use the consumer’s price index (CPI), which is reported frequently in the news?
Chem. Engr.(US) Engr-News Record Oil & Gas J Chem. Engr.(US)
122
Capital Cost Estimating
Cost estimation
Year Marshall & Swift Eng-News
Nelson-Farrar Chem Eng Plant Cost Index (CEPCI)
1970 301 133 365 123
1980 675 300 900 261
1990 915 400 1200 358
2000 1089 510 1500 394
2000/1970 3.6 3.8 4.1 3.2
Has gone private now; use CEPCI instead
Plot of inflation data(from: Edgar, Himmelblau and Lasdon, Optimization for Chemical Processes 2nd Ed., McGraw Hill, 2001)
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Capital Cost Estimating
Cost estimation
Example
124
Capital Cost Estimating
Cost estimation
In 1979, a distillation column cost $65 690. What is the cost of the unit in 2011?
Marshall and Swift index in 1979 was 607 and in 2011 is was 1490.
Sample cost estimation data
The base cost is $8,000 for an exchanger with A = 100 m2
The correlation is valid for A = 2 to 2000 m2
exponent
Corrections for pressure and material
Define basic shell and tube
Estimate uncertainty in %
Costs are for mid-1970
125
Capital Cost Estimating
Reference: Woods, 1993 22
2
A
B
m 2000exchanger heat desired of Aream 2
20m 100
exchanger heat desired of Area0.02
20factorfactor0.02
Uncertainty in the tables is large; why?
• Covers times of economic stagnation and growth
• Covers all locations (at least in North America)
• Covers range of equipment suppliers with various technologies and efficiencies
For a specific location and equipment, a company would likely have data with less uncertainty.
126
Capital Cost Estimating
Cost estimation
Shell and tube, water cooled condenser
http://www.wellman-graham.com/Condensers.htm 127
Capital Cost Estimating
Cost estimation
Condenser in Bartek Plant
Courtesy Bartek 128
Capital Cost Estimating
Cost estimation
Class exercise: Estimate the Bare Module cost in 2000 for the following equipment.
• Shell and tube heat exchanger #1
• Floating head
• Carbon steel for shell and tubes
• P = 1.0 MPa
• Area = 70 m2
129
Capital Cost Estimating
Cost estimation
Class exercise: Solution for heat exchanger #1
From page 5-5 in Woods (1993)
FOB = $8000 x (70/100)0.71 = $6210
Bare Module = $6210 x 3.14 = $19,500
No corrections for pressure (P < 1.1 MPa) or material (carbon steel) are required
Cost from 1970 to 2000 by Marshall Swift = (1089/301) x 19,500
= $ 70,500 40%
Capacity factor
Bare module, FBM
Inflation factor
130
Capital Cost Estimating
Cost estimation
131
Capital Cost Estimating
Cost estimation
Systematic approach:
1. Look up the correlation. Does the equipment match ours?2. Check the range. Does out capacity factor fall in the range?
• Use the same units as the given factor. Another range (even in a different set of units) might apply.
3. Read base cost ($) and base year = $FOB1970 (usually)4. Inflate for capacity using exponent n5. Adjust price for materials, pressure, and temperature6. Calculate bare module cost, using bare module factor, FBM7. Inflate the price into today’s dollars, using an index8. Report the value as a range, rather than a point estimate.
University of New South Wales, Austalia, http://www.cse.unsw.edu.au/~lambert/vrml/kumip/docs/reflux.html
Distillation reflux drum
132
Capital Cost Estimating
Cost estimation
Class example: Estimate the Bare Module cost in year 2000 for the following equipment.
• 57m3
• horizontal, cylindrical, dished ends
• P = 0.30 MPa
• T = 290 K
• Material = carbon steel (c/s)
Reflux drum
Height-23.4 m
Diam.-2.57 m
30Trays,
c/s sieve
c/s
133
Capital Cost Estimating
Cost estimation
COST ESTIMATION
134
Class example: Solution for vessel
1. Use Wood’s page 2-2 (it is appropriate)
2. Range: 57m3 x 264 gal/m3 /1000 = 15 < 80
3. FOB 1970, A = $1900
4. FOB 1970, B = 1900 x (57/3.8)0.62 = $10,180
5. Not required
6. BM 1970 = $10,180 x 3.0 = $30,550
7. BM 2000 = $30,500 x (1089/301)
8. BM 2000 = $110,500 40% error
Capacity factor, volume
Bare module, FBM
Inflation factor, MSwift
Not reported for table entry, use from vertical drum. Why?
Height-23.4 m
Diam.-2.57 m
30Trays,
c/s sieve
c/s
135
Capital Cost Estimating
Cost estimation
fpiping
The Bare Module factor is the sum of many costs. We can find the factor for each element for specific equipment.
From Woods (1993), page 1-58 136
Capital Cost Estimating
Cost estimation
BM 1970 = C0 x FBM = BM
BM 1970 = $6,210 x 3.14 = $19,500
This includes the cost of the original unit!
FOB cost = $ 6,210 x 1.00
All BM costs (left) = $ 13,290 x 2.14
Total bill, BM1970= $ 19,500 x 3.14 factorSo …
All BM costs = C0 FBM – C0 = C0(FBM – 1)
HEx example from before
Pressure and materials factors
Example: a shell and tube heat exchanger (see next slide also)
• FP = 1.25 for the case of pressure = 3 MPa
• FM = 3.0 for the case of 316 stainless steel
How are BM costs affected by this?
137
Capital Cost Estimating
Cost estimation
Capital Cost Estimating
COST ESTIMATION
138
Capital Cost Estimating
Which Bare Module contributors change when pressure and material are significantly different from the base FOB?
Bare module cost includes the following labour and materials
•Uncrating
•Inspection
•Structure (foundation)
•Instrumentation
•Painting and insulation
•Utility hookups (electrical, etc.)
•Engineering supervision
•Piping
NO!
YES!
139
Cost estimation
Cost estimation with pressure (FP) and materials of construction (FM) corrections.
FOB Cost for equipment at base pressure and material
Cost for installation of base case equipment without P and M correctionsAdditional FOB cost for pressure and materials correction (the 1.0 is for base case)Additional cost for bare module piping (due to P and M)
factorCapacity FOBC unit0
)1(0 BMFC
)1(0 MPFFC
))()(1(0 pipingMP fFFC
Data on fpiping in Woods’ page 1-58, Table 1-11. Timmerhaus et. al. give a value of 0.68 for fluid. Value of is from 1.0 (Turton) to 0.70 (Woods). 140
Capital Cost Estimating
Cost estimation
fpiping
The piping factor is different for each equipment.
From Woods (1993), page 1-58 141
Capital Cost Estimating
Cost estimation
Class exercise: Estimate the Bare Module cost in 1970 for the following equipment.
• Shell and tube heat exchanger
• Floating head
• 316 stainless steel for shell and tubes
• P = 5.6 MPa
• Area = 70 m2
142
Capital Cost Estimating
Cost estimation
Capital Cost Estimating
COST ESTIMATION
143
Class exercise: Solution for heat exchanger
FOB Cost for equipment at base pressure and material
FOB = $8000 x (70/100)0.71 = $6210
Cost for installation (unchanged from base)
C0 (FBM – 1) = $6210 (3.14 – 1) = $13290
Additional cost in FOB for pressure temperature and materials
C0 (FPFM – 1) = $6210(1.52 x 3.0 – 1) = $22110
Additional cost for bare module piping (due to P & M)
C0 (FPFM – 1) (fpiping) ( ) = ($22110)(0.46)(0.70)= $ 7120
Total BM cost in 1970 = $ 6210 + $13290 + $22110 + $7120 = $48,730144
Capital Cost Estimating
Cost estimation
Base condition FOB
Capacity factor
Inflation factor
FOB w/o corrections
Purchase & installation w/o corrections
(FBM – 1)
Installation w/o corrections
C0
Corrections to FOB,(FP*FM – 1)
FOB correction
Installation correction
Purchase & installation corrections
Piping correction,
fpipe ()
Schematic of cost estimation withpressure and material corrections
145
Cpital Cost Estimating
Class exercise: Estimate the Bare Module cost in 2000 for the following equipment.
• Packaged vapor recompression refrigeration unit
• 7040 kW
• Evaporator T = 275 K
• Includes compressor, condenser, evaporator, motor, insulation, and instrumentation, delivery, installed
• Material c/s146
Capital Cost Estimating
Cost estimation
McMaster University Boiler House
147
Capital Cost Estimating
Cost estimation
COST ESTIMATION
148
Class exercise: Solution for refrigeration unit(Note: this solution puts step 7 earlier, but the answer is still the same)
From Wood’s page 9-7, (we are extrapolating!!)
FOB 1970 = 100,000 (7040/1000)0.77 = $450,000
FOB 2000 = 450,000 x (1089/301) = $1,626,000
FOBtemperature = (1.02-1) x 1,626,000 = $33,000
BM 2000 = 1,626,000 x 1.4 = 2,276,000 (for base unit)
BM 2000 = $ 2,276,000 + 33,000 = 2,310,000 30%
Slightly below 4.4 C, assume no effect on installation (BM) costs
Note the low FBM for a packaged unit. Does this make sense? 149
Capital Cost Estimating
Cost estimation
Class exercise: Solution for refrigeration unit.
From Wood’s page 9-7,
FOB 1970 = 100,000 (7040/1000)0.77 = 450,000
FOB 2000 = 450,000 * (1089/301) = 1,626,000
FOBtemperature = (1.02-1) * 1,626,000 = 33,000
BM 2000 = 1,626,000 * 1.4 = 2,276,000 (for base unit)
BM 2000 = $ 2,276,000 + 33,000 = $2,310,000 30%
If we had used the average BM factor of 3.6 from Peters et.al., the incorrect estimate would be $5,900,000!
150
Capital Cost Estimating
Cost estimation
151
Capital Cost Estimating
Cost estimation
Class exercise: Estimate the Bare Module cost in 2011 for a 20 kW centrifugal pump, made from 316 S/S clad, and a suction pressure of 7000 kPa.
FM = 1.45
FP = 1.90http://www.lowara.com/products/photo.php/2670
1. Correlation: use Woods, p8-8, since it applies
2. Range check: Base unit is in kW, our unit is 20 kW, so
which means n = 0.39
3. Base unit cost: $FOB1970,B of 10 kW was $920
4. Capacity inflation: = $1205
5. Materials inflation: FBM = 3.3, FM=1.45 and FP = 1.90
Bare module cost (no corrections) = C0(FBM) = 1205 x 3.3 = $3980
Module installation, etc =C0(FBM – 1) =3980 – 1205= $2775
So $2775 = incremental cost of getting unit in the bare module area152
Capital Cost Estimating
Cost estimation
23kW
20kW1
0.39
A1970, 1020920$FOB
5. Materials inflation:
FBM = 3.3, FM=1.45 and FP = 1.90Charge to upgrade the equipment = 1205 x 1.45 x 1.90 – 1205 = $2115
This is what the vendor adds to our bill = C0(FMFP – 1) = $2115
Reasonable to expect OUR cost to upgrade piping in the BM is some fraction of this $2115. Naïve estimate would be ($2115)(FBM) = $ 6980.
But, we don’t need to upgrade all BM costs, just the piping portion. For pumps: fpipe =0.3 This indicates 0.3/3.3 = 9% of the cost of upgrading the BM is due to piping.
Further, we don’t need to upgrade every pipe in the BM, some factor of the total only, where 0.7 < <1. We will assume 70%.
So piping upgrade = (2115)(0.30)(0.7) = $444.
Now let’s add up our estimates.153
Capital Cost Estimating
Cost estimation
5. Materials inflation:
Cost of the equipment $ 1205
Cost of installation into BM $ 2775
Cost of the vendor’s upgrades $ 2115
Cost of our upgrades in BM piping: $ 444
6. Bare module cost: $ 6540So the fully installed price was multiplied 6540/1205 = 5.4 times
7. Price inflation: $BM2011 = = $30,420 using CEPCI
8. Error bounds: assuming 40%
$18,250 < $BM2011 < $42,600154
Capital Cost Estimating
Cost estimation
1265866540
Homework problem:
Capital cost of a 316 stainless steel distillation column
21.3 m high, 2.3 m diameter
26 trays at standard spacing of 0.6m
3.2 MPa operation
155
Capital Cost Estimating
Cost estimation
156
Capital Cost Estimating
Cost estimation
Comparison of Bare Module (installed) cost estimates in US Dollars for 2000
Equipment Woods(Individual BM Factor for each equipment)
Peters, Timmerhaus,
West*
Matches Internet Site*
Heat Exchanger
70,500 39,100 100,000
Horizontal Drum
110,000 107,000 89,100
(15,048 gallons)
Refrigeration 2.31 M$[1.3 to 3.2 M$](extrapolation)
5.33 M$
(extrapolation)
4.51 M$
(interpolate 20 and 40F)
* Bare module factor of 3.6 from Peters et. al. table 6-9. 157
Capital Cost Estimating
Cost estimation
Feed tank
FC1
P3
V30
0
TC3
T4
Fueloil
F2
T7
Producttank
C.W.
F7
Air
Intake
FC5
L1
L2
P1
P3
T5
T6
The Bare Module method provides equipment costs for units considered. These units must be connected into an integrated plant. What additional equipment is required?
Storage
Material transport between units (BM)
Connection to utilities
158
Capital Cost Estimating
Cost estimation
The Bare Module method provides equipment costs for units considered. The cost of basic instrumentation is included in the bare module factor;; however the cost for “additional” sensors, e.g., analyzers must be added if they exist.
Also, the cost for the control system, including computing, consoles, power supply, wiring and control house must be estimated separately.
159
Capital Cost Estimating
Cost estimation
The Bare Module method provides equipment costsfor units considered. Please do not forget that all other equipment must be estimated. For new facilities and large changes to existing facilities, much new equipment is required
Battery Limits, the process, roads, etc.
Offsites, storage, waste treatment, etc
Utilities, steam, cooling water, air, fuel, etc.
Administration, offices, labs,
machine shops, etc.
Outside battery limits
160
Capital Cost Estimating
Cost estimation
Manufacturing costs - These are incurred with every unit of production and do not include capital items.
• Direct – raw materials, labour, labs, utilities, consumable supplies, waste treatment, packaging and shipping, utilities = (water, electricity, steam, cooling, compressed air, inert gas)
• Fixed (indirect) - Land taxes, insurance, maintenance, licensing fees, plant administration, etc.
• General - Corporation, marketing & sales, finance, R&D, etc.
How do these costsdepend on the plant production rate?
162
Capital Cost Estimating
Cost estimation
• Direct - materials, labour, utilities, supplies, waste treatment, etc.
• Fixed (indirect) - Land taxes, insurance, plant administration, etc.
• General - Corporation, sales, finance, R&D, etc.
production
production
Labo
ur
production
Mat
eria
l st
ream
s
163
Capital Cost Estimating
Cost estimation
Manufacturing costs - These are incurred with every unit of production and do not include capital items.
Capital costs
• Very rough - Total unit/plant estimates; see Woods, 1993 and other databases.
• Good accuracy - Combine flow sheet (e.g., HYSYS, Aspen, Pro II) results with equipment-specific information, e.g., pump efficiency, fired heater efficiency, etc. In addition to process, utilities systems (plant fuel, steam, and electric power balances) can be modelled.
164
Capital Cost Estimating
Cost estimation
How does Aspen calculate equipment costs? See Seider et al. textbookfor additional insight, as well as on-line research.
Manufacturing cost estimate should consider every major cost and give the basis of the value, e.g.,
• Flowsheet• Experience (staffing)• Factors for other costs
The result of this analysis becomes one element of the profitability calculation.
For sensitivity analysis, variable and fixed costs should be identified individually in the profitability analysis
COST OF MANUFACTURE Estimate based on
Flowsheet & preliminary design
Cost Item Factor
Quantity/ year
Cost/ quantity
Annual Cost
($/year)
Variable costs Raw Materials kg/year $/kg - itemize all Products - itemize all By-products - itemize value, waste treatment costs, etc.
Consumables - catalyst, solvents, etc. Fixed costs ($/person) a. Operating personnel (1 post = 4.4 people)
70,000
b. Supervision and engineering
0.25*a 100,000
c. Maintenance personnel
0.03*FC 75,000
d. Engineering & Management
0.5*(a) 100,000
Overhead on personnel 0.4* (a+b+c+d) Maintenance materials 0.03*FC Insurance 0.01*FC Taxes (property) 0.02*FC Laboratory personnel and consumables
0.15*(a+b+c)
Royalties Operating overhead (business and employee relations, etc.)
.25*(a+b+c+d) *1.4
Cost of Manufacture Sum of all items
Notes: 1. Profitability analysis will integrate the Cost of Manufacture with capital cost,
taxes, depreciation, and contingency. (General costs could be added depending on the basis of the study.)
2. All costs for project accounted for, including onsites, offsites, and utilities, including steam, electricity, fuel, water, oxygen, nitrogen, refrigeration, etc.
3. Factors based on tables in Peters et. al., Towler and Sinnott, and Sieder et. al. All are approximate and should be replaced by process –specific information, where available. (FC = fixed capital cost) 165
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Manufacturing costs:
• Utilities
• Seider, Seader, Lewin, Widagdo, table 23.1
• Turton, et al., Chapter 8
• Cost of personnel
• $ 60,000 to $70,000 per operator-shift, or $35/hr
• One “post” or shift = 4.4 x annual salary
• $100,000 for managers and engineers
• Overhead is about 40% of salary
• Personnel do not scale with production when equipment size can be increased.
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Manufacturing costs - some cautions:
• Do not use standard inflation for energy or raw materials costs. Show/research Crude Oil price over the last 100 years.
These can change rapidly up and down due to international incidents.
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Manufacturing costs - some cautions:
• Equipment selected strongly affects maintenance and waste treatment.
• Remember costs for operating outside battery limits, e.g., the laboratory.
See Haseltime, 1996
• Operating costs depend on total operation time.
• Incremental cost of steam changes significantly from summer (excess steam available, cost = $0) to winter (when extra fuel is required to produce steam)
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